Sales targets are a good thing. Challenging goals, coupled with rewards for meeting them, can be enormously powerful in motivating performance and driving results. But there is a downside: fixating too much on the numbers and thus forgetting the person on the other end of that number can backfire, leading to customer dissatisfaction and lower sales.
Don’t deemphasize the numbers, but counterbalance the focus on numbers with reminders of who benefits from what you sell. I’d like to propose making the customer—not as a “target”, or a “wallet”, but as a real, living, thinking and feeling person—a major focus of your sales efforts.
First, a few examples to illustrate the power of personalization:
· One study showed that attaching a digital picture of the patient to a medical file increased the amount of time that radiologists spent looking at x-rays, and led to them spotting more unlooked-for issues.
· Employees in a call center dedicated to soliciting donations from alumni for scholarship money were connected with students who had benefited from the scholarships, and heard about the difference the money had made in their lives. One month later, they had brought in an average of $506 per week as compared to $186, an increase of 172%.
· When I worked in a bank, we had targets for cross-selling additional services to increase profitability. One product was credit life insurance, which was sold to people taking out car loans or consumer loans. The average was about 25% or less per loan made, except for one lady, Rosa, who consistently had almost 100% success. When we asked her why she was so successful, she told us that a close relative of hers had died, and his spouse ended up losing the car because she could not make the payments. Because she believed so strongly in the benefit, it made it easy for her to pass on that belief to customers.
· Here’s a negative example: in wartime soldiers usually depersonalize the enemy by giving them a nickname (often derogatory), which makes the idea of killing them a little less horrible.
What these examples point out is the importance of personalizing the outcomes that you sell. When you can connect your sales efforts to real results for real people, you will have a much stronger intrinsic reason to succeed than just to selfishly make a number. You will be guided by a sense of purpose which can be a much more powerful motivator than financial self-interest. Which achievement would you be more likely to brag about to your friends, making your number or making a difference in someone’s life?
We all know that testimonials from satisfied customers can be useful tool to convince customers, but if you are a sales manager, you might see even better results by using those testimonials for your own people.
When you start seeing your customers as a person and not a target, they will notice the difference. Trust requires more than just competence; they must also perceive that you have a genuine concern for their welfare. I call it the grandma rule: If that were your grandma sitting across the desk from you, what would you recommend to her?
It’s a commonplace in management that what gets measured gets done, and for the most part I agree with it. But when it’s taken too far it can backfire on you—sapping morale, breeding resentment, and fostering destructive sales behaviors.
I’ve been doing some research into the Wells Fargo scandal for a speech I’m delivering next week about ethical sales cultures. One of the most fascinating documents is a copy of the lawsuit that the City of Los Angeles filed against Wells in May 2016. It details the pressure-cooker management practices that branch managers and above followed to try to fulfill ambitious—some would say unrealistic—goals for cross-selling in connection with the bank’s “Going for Gr-eight” program. There is a lot of fodder in there for anyone studying unhealthy management practices, but what I found the most repellant was the extreme monitoring and measurement that went on.
In many branches, daily sales for each branch and each employee were reported and discussed 4 times a day, at 11, 1, 3 and 5pm! Some branches, doubtless run by high achievers who really wanted to impress their bosses, had hourly calls. The verb discussed is a euphemism, because the report further states that “managers constantly hound, berate, demean and threaten employees to meet unreachable quotas.”
Is it any wonder that employees resorted to cheating? And by cheating, I mean opening accounts for customers without their knowledge or authorization: 1.5 million deposit accounts and 500,000 credit card accounts. While all this measuring paid dividends in the form of a steady rise in the bank’s stock price, it also ended in congressional investigations (and what CEO would not relish the opportunity to be lambasted on national TV by Elizabeth Warren?), resignations, penalties and lasting damage to its reputation.
We all laugh at the stereotype of the helicopter parent, who can’t seem to let go when their kids go to college, constantly hovering over them to monitor what they’re doing and to step in to help them whenever they feel it’s necessary. I wonder how many people who laugh at that behavior in others might be guilty of it themselves when it comes to how they manage their sales teams?
Wells Fargo was an extreme case, but the potential for helicopter managing exists everywhere, particularly under pressure of ambitious sales quotas. When sales slip—or just don’t rise fast enough—it’s human nature for the manager to dig in and figure out what’s going on, or to lend a hand to get a deal done. But if that level of intervention doesn’t work right away, it’s also human nature to redouble your efforts and ratchet up the pressure. As psychologist Edward Deci says, “Control is an easy answer,”[1] but that constant monitoring and pressure comes with a price:
- The most immediate and obvious price is that eats into selling time, forcing salespeople to constantly attend calls and file reports.
- It kills trust. How do you get your buyers to trust your account managers when you don’t?
- It drives short term thinking. I once had a client who hired me to train their enterprise reps to develop account plans meant to cultivate long-term, forward-thinking relationships with clients; but then held their feet to the fire with quarterly quotas.
- It stifles outside-in thinking. Fear makes us inwardly focused, which makes it difficult to see things from the customer’s perspective. At the same time, you begin to see each customer as a target and not a person.
- It stifles creativity. Pressure actually does improve performance—for routine tasks that are done the same way every time. But pressure degrades performance in tasks that require creativity and resourcefulness, which pretty much describes high-level B2B complex sales. (In Wells’ case, the pressure did make their people more creative—in finding ways to cheat the system
- It can lead to a vicious cycle, where too much pressure hampers performance, which leads to more pressure. Like a drug that requires increasing amounts to have the same effect, it can become the monster that must continually be fed.
Keep in mind that the only reason the Wells Fargo scandal came to light is because it was so egregious, which makes one suspicious that this kind of behavior is far more prevalent than we know. Most sales managers are not that extreme, of course, but pressure does funny things to people, including turning managers into stalkers. Ask yourself: do you hover too much?
[1] Why We Do What We Do, Edward L. Deci and Richard Flaste.
My son was in line to pay at a Starbucks coffee shop one time, and observed the following exchange between the man just in front of him in line to pay and the barista:
Man: How much is that pastry?
Barista: Three dollars.
Man: I’ll give you two.
Barista: Sir, this is Starbucks; the price is the price.
Man: Let me speak to your manager.
Manager: What seems to be the problem?
Man: I’ll give you two dollars for that pastry. If you don’t sell it soon, you’re going to have to throw it out.
Manager: OK.
My son (stepping up to pay): I’d like a dollar off my bill, please.
Do you hate to negotiate? Many people hate to, or fear to. They meekly pay the asking price no matter how high nor who’s asking.
On the other hand, some people seem congenitally incapable of accepting the first offer, and will argue about price at the drop of a hat. I used to work with a guy named Don, and one time in Canada there were three of us at a steak restaurant and we were all considering ordering the prime rib. Don called the waiter over and negotiated a volume discount! I wanted to quietly slide under the table, but Don just blithely went on his way. The waiter put his foot down when Don tried the same tactic with dessert, though.
As this educational video demonstrates, people who don’t like to negotiate will always be at the mercy of those who do.
I used to be firmly in the camp of those meek souls who find haggling to be either frightening, distasteful, or immoral, but I’ve learned to come a long way. Not quite like Don, but I’ve learned that negotiation is perfectly acceptable, profitable and even fun.
My awakening came about in a funny way. I was teaching a sales training class with my boss one December. We were scheduled for two days of straight sales skills and one day of negotiations training. I had never seen the negotiation module and my role was to observe and learn. Unfortunately, my boss got called away unexpectedly and told me that I would have to deliver the module the next day. I spent most of the night going over the material and rehearsing my delivery, and was able to pull off a decent performance. I can’t say for sure how much the students learned about negotiating, but I know I learned a ton, which I proved to myself when I went to buy my wife a present at a mall jewelry store. I picked the one I wanted, and then offered them half the price on the tag if I paid cash. I ended up getting it for 30% off.
Since that time, I’ve negotiated with many parties in many different countries. I haven’t always been as successful as I would have wanted, but one thing I have found out for sure: it never hurts to ask.
As I wrote in my last blog post, an understanding of the psychology of pricing can help you earn the margins you deserve. Even the most analytical buyers are not rational calculating machines, so if you understand the psychological levers that affect their willingness to pay, you can raise your chances of getting the margins you deserve. We’ll start with the concept of signaling.
Psychologist Robert Cialdini in his book Influence, relates the story of a jeweler in Arizona who was stuck with a display case full of slow-moving turquoise jewelry. Before leaving town, she left a note for her assistant to mark down all the prices in the case by ½. The assistant misread the note and doubled all the prices. The entire lot sold out within days.[1]
That story illustrates an important point about pricing. In a world of perfect information and completely rational buyers, classical supply and demand curves would make perfect sense. As prices for a good go up, demand will go down. But in the real world, sometimes raising prices can make demand go up. That’s because buyers rarely have perfect information, nor do they decide on pure logic.
Let’s look first at information. Like a lover’s glance, a single number can speak volumes.
Imagine that you go to a store to buy a new set of pots and pans. You like to cook, and hope to get better at it, but you’re by no means a professional chef. As you examine the three different sets on offer, you peruse the small placards that list the features of each, but they don’t mean much to you. But of course you notice the prices, and chances are very high that you will not select the lowest-priced set; or if you do, you will think hard about what you’re giving up to save a few dollars. Without realizing it, you are interpreting the signals that the price tags are sending you.
Signaling works because it can simplify your decisions and short-cut your search for information. As Daniel Kahneman, one of the founding fathers of behavioral economics, reminds us, “If a satisfactory answer to a hard question is not found quickly, System 1 will find a related question that is easier and will answer it.”[2] So, rather than trying to tackle the question “what is it worth?”, we ask instead, “what does it cost?”
Also, we implicitly assume that something is priced based on how much it cost to produce, if one set of pans costs twice as much, it must have superior materials and craftsmanship, so it’s going to cook our food more evenly, look better in our kitchen, and last longer. We draw all those conclusions
Finally, price can send a signal about relative supply and demand. If the price of something goes, up, it must mean it’s in greater demand, which can make it seem more attractive to a potential buyer. When Chivas Regal was faced with flat whiskey sales in the 1970s, they increased sales significantly by changing the label and boosting the price by 20%.[3] (There’s even a prestige factor, in which some people will pay exorbitant prices for luxury goods precisely because they prices are exorbitant, but that’s outside the scope of this book.)
Since it’s so difficult to do all the research and weigh all the different factors that affect value, we also gut feel to help us decide, and one of the most important emotions associated with buying decisions is fear/confidence dynamic. That’s why confidence is one of the greatest assets a salesperson can have. Those who act more assertively and confidently tend to be accorded higher status, and in general are perceived to be more competent than they actually are.[4] If you come to the table unapologetically with a higher price, you send a strong signal about your belief in your solution, and that confidence can be contagious. That’s why I’ve advocated before that when your buyer objects that your competitor has a lower price, instead of getting defensive, ask them to consider why they place a lower value on their product.
Prices and confidence are strongly correlated—in plain English, we all believe that we get what we pay for. While that is not always true, it’s a powerful enough belief that it can even become a self-fulfilling prophecy. Dan Ariely, relates the results of an experiment he conducted at MIT in which participants were recruited to test a new painkiller, called Veladone-Rx, which they were told sold for $2.50 a dose. They were first subjected to a series of painful electric shocks. Then fifteen minutes after taking a tablet, they were shocked again. Almost all the participants reported that the perceived intensity of the shocks was reduced the second time. Another group went through the same procedure, but they were told that the Veladone sold for 10¢. About half experienced pain relief. The punchline is that the tablets that both groups took the same tablet—of Vitamin C!
That experiment demonstrates the power of the placebo effect in medical terms. Placebos work because we think they will, and it also shows the hold that prices can have on our expectations. The idea that you get what you pay for is strongly ingrained in our minds, that, “If we see a discounted item, we will instinctively assume that its quality is less than that of a full-price item—and then in fact we will make it so.”[5]
Similar effects have been found for cold medication and energy drinks. One experiment even found that the price tag associated with a glass of wine affected the perception of taste, and even showed up in increased activity in the pleasure centers of their brains.[6]
Ariely does go on to say that in further experiments he found that consumers who were asked to think about the relationship between price and quality were less likely to be affected, so it’s important not to read too much into this, because after all we’re assuming that B2B buyers will be more thoughtful or implement more safeguards against this type of thinking. Yet I’ve long had my suspicions that the credibility of many a consultant or speaker has been affected by the fee they charge.
Prices send signals that buyers receive loud and clear. Think about this before you decide to lower your price to win the business.
[1] Robert B. Cialdini, Influence: The Psychology of Persuasion, (New York: William Morrow, 1993), p. 1.
[2] Daniel Kahneman, Thinking: Fast and Slow, p. 97.
[3] Hermann Simon, Confessions of the Pricing Man, p. 28.
[4] Cameron Anderson, Sebastien Brion, Don A. Moore, and Jessica A. Kennedy, A Status-Enhancement Account of Overconfidence, 2012.
[5] Dan Ariely, Predictably Irrational, (location 2556)
[6] https://www.gsb.stanford.edu/insights/baba-shiv-how-wines-price-tag-affect-its-taste
